Tuesday, March 24, 2015

NeighborWorks
America, a nonprofit, distributes much of its money to
counseling groups that dispense mortgage advice and sometimes financial aid.

Established by
lawmakers in 1978, NeighborWorks became one of dozens of congressionally
chartered charities and patriotic organizations such as the Boy Scouts of
America and the American Red Cross. Like the other two venerable organizations
it is in disarray.

The group reveals an
organization in disorder -- with sweetheart contracts, document fudging and
unexplained departures of top officials. Executives at the group awarded at
least two large jobs to insiders without bidding, later justifying one of the
contracts with a backdated memo, according to interviews with former employees,
tax filings and previously unreported company audits. In addition case managers
signed off on a multimillion-dollar technology deal to a recently formed
contractor, which had board members in common with NeighborWorks and used the
same law firm. The contractor overcharged by as much as 20 times, one of the
audits said.

Quantum, a company run by a former NeighborWorks employee, was listed as receiving more than
$900,000 in fees in just one year, making it one of NeighborWorks’ highest-paid
consultants. Quantum’s address was a one-bedroom apartment, in Washington,
owned by a former NeighborWorks software developer. Two executives signed a
backdated memorandum. Senior officials began jobs at housing-related nonprofits
shortly afterward the discovery of the problems.

NeighborWorks would
need help processing applications. It signed a contract for technology services
with Hope LoanPort Inc., a non-profit that had ties to both its own leadership and
HUD. NeighborWorks paid Hope LoanPort about $20,000 per month for web hosting,
according to the audit, which said the subcontractor charged other clients
$2,000 to $2,700 for the same level of service. Other fees were eight to 22
times the rate the subcontractors billed others, an audit found. Hope LoanPort,
which is still under contract to NeighborWorks, eventually billed more than $3
million over two years -- including costs that “would probably be considered
inordinate,” wrote its internal auditor

Audits revealed irregularities but no fraud. Many
of the principals have left. Despite little leadership, management shortcomings
and no oversight, the organization may continue on as in the
past.(source)

The problems are remarkable similar to that of the
American Red Cross, the sister congressionally-chartered organization. Both
will continue with impunity because both are too large to be rejected.

Thursday, March 19, 2015

Update:The latest edition of Nonprofit Imperative we wrote about the accounting firm of Loeb & Troper suddenly closing its
door after it had uncovered a $19 million agency deficit. This was surprising in that
It has performed the most recent audits for 28 of the big Jewish nonprofits in
the city—a very big market share for a relatively modest firm. The problem is
that two of their clients, FEGS and the New York Legal Assistance Group, have
recently turned up with what could be called serious financial irregularities.
FEGS quite suddenly announced that and would be forced to close.

The
impact is striking. At FEGS’ peak, the nonprofit had
about 350 locations and about 4,000 employees, 2,217 of which were defined as
"highly skilled professionals,” according to the filing. FEGS cares for
135,000 individuals annually.

Now Crain's-NewYork uncovered the reasons why
there were the sudden closures. Federation Employment and Guidance
Services, an 81-year-old Manhattan social-services agency, filed for bankruptcy
after an ambitious expansion of services, locations and for-profit subsidiaries
left the organization with exorbitant costs and shrinking revenue.

Mismanagement andlack of financial oversightand prudence loom large in the narrative that
describes the circumstances that led to the bankruptcy. But in the end, FEGS
was doomed by expenses that outpaced revenue. Between 2013 and 2014 alone,
salaries and benefits rose 7% while revenue fell.

Leadership instability and an
outdated financial-management system took a toll. The nonprofit had three chief
financial officers leave within a two-year span, and its financial-management
system resulted in inefficient billing collections and “compromised management’s
ability to make responsive business decisions in a timely manner.

And then there were the ill-fated
for-profit subsidiaries. FEGS threw capital into the units—AllSector, HRD and
Single Point—in the hopes of generating income. But the entities didn’t succeed
in becoming standalone profit centers, and instead primarily provided services
to FEGS, leaving the nonprofit on the hook for their losses. The AllSector
Technology Group, for example, derived 65% of its revenue from FEGS.

Neil S. Rodgers, a 30-year city government veteran, former D.C. Council
aide, and director of the council’s Parks and Recreation Committee was
convicted by a federal grand jury for diverting more than $100,000 in taxpayer
funds.

Assistant U.S. Attorney Michelle A. Zamarin told jurors that “Neil
Rodgers stole taxpayers’ money meant for children to pay for a party for
adults.” Rodgers facilitated a plan to divert funds that taxpayers designated for
childhood drug and alcohol prevention programs.

Thomas pleaded guilty in January 2012 to stealing more than $350,000 by
earmarking taxpayer money for children’s causes and then steering the money
through nonprofit groups into his pocket. His chief of staff and four leaders
of three nonprofit organizations — have pleaded guilty to their roles in
concealing or aiding in the schemes. (source)

Monday, March 16, 2015

by Gary Snyder The nonprofit Horizon
Cross Cultural Center will pay more than $1.7 million to settle charges
that it falsified records and overbilled local agencies for providing transportation services to elderly Orange County (CA) residents, according to a
settlement agreement finalized. (source)

As of
now, it’s hands-off for federal income taxes, other taxes and more for a
self-proclaimed church.

For
generations, churches have been exempt from income taxes. What’s more, all 50
states and the District of Columbia give them a pass on property taxes.

A parsonage
allowance says an ordained member of the clergy can live tax-free in a
home owned by his or her religious organization. Alternatively, the clergy
member can receive a tax-free annual payment to buy or rent a home.

U.S. churches
have in all 50 states and the District of Columbia been given a pass on
property taxes.

A new
‘church’ recently opened in Panama City Beach, Florida.

But
this church wasn’t even close to being legit. It charged a $20 ‘suggested
donation’ and had an ATM. Its website boasted ‘Anything But Clothes,’ lingerie
and pajama events, ‘Wet n wild,’ twerking and naked paintball parties. The holy
iconography featured oral sex and drinking.

Local
officials stripped it of its tax-exempt status. Bay County Property Appraiser
Dan Sowell rescinded the exemption that allowed The Life Center to avoid paying
state property taxes. After all, it was clear that the property wasn’t
used predominantly for religious purposes. (source)

About Me

Gary Snyder is the author, most recently, of the groundbreaking expose on the charitable sector, Silence: The Impending Threat to the Charitable Sector as well as the often-cited guide on best practices and key concepts, Nonprofits: On
the Brink.

He is the publisher of a
twice-monthly newsletter, Nonprofit Imperative that gives an update on the current status of the
charitable sector.

Snyder is often quoted and frequent contributor to the blog of the National
Committee for Responsive Philanthropy. Snyder twiceauthored the Governance Chapter of the Michigan
Nonprofit Management Manual (4th and 5th editions).

He is a speaker on ethics,
financial and governance matters of the sector. For almost a decade, Snyder is frequently
consulted by Congress and has been quoted in print, broadcast and online media
outlets.